Wen Shu Guan Tao (Global Chief Economist, BOC Securities)
essentials
On the basis of flexible and accurate implementation of monetary policy, it is necessary to strengthen coordination with fiscal, industrial and regulatory policies, and coordinate financial support for the real economy and risk prevention.
Since the beginning of this year, China has effectively implemented macro policies, and the economy has continued to recover and is stable and improving. However, the current global epidemic situation is still evolving, the external environment is becoming more severe and complex, and the domestic economic recovery is still unstable and uneven. After entering the third quarter, under the influence of the superposition of supervision policies on the epidemic and flood conditions, many economic and financial indicators performed weaker than expected. In this context, since July, China has re-proposed to do a good job in cross-cycle adjustment of macro policies and keep the economy operating in a reasonable range.
At the meeting of the Political Bureau of the CPC Central Committee in July last year, it was first proposed to establish a long-term coordination mechanism in epidemic prevention and control and economic and social development, adhere to the strategic direction of structural adjustment, rely more on scientific and technological innovation, improve the cross-cycle design and adjustment of macroeconomic regulation and control, and achieve a long-term balance of stable growth and risk prevention. This is different from the counter-cyclical adjustment of traditional macroeconomic regulation and control, which is a major theoretical innovation, and also a major strategic deployment to implement the new development concept established by the Nineteenth National Congress of the Communist Party of China, adhere to the supply-side structural reform as the main line, and adhere to the reform and opening up as the driving force to promote high-quality development.
The 14th Five-Year Plan emphasizes the need to improve the macro-control policy system, do a good job in cross-cycle policy design, and improve the ability of counter-cyclical adjustment. It can be seen that cross-cycle is a supplement to counter-cyclical adjustment rather than a substitute. The emphasis on cross-cyclical rather than counter-cyclical adjustment and maintaining the continuity, stability and sustainability of policies now shows that the economic recovery has not yet been completed, and macro policies are not eager to withdraw, but also shows that in the face of economic downward pressure, macro policies are not eager to increase the weight, but to make full use of existing policies. Therefore, the RRR cut in July did not change the general tone of the central bank's stable monetary policy, and the lack of interest rate cuts was not a policy accident.
The domestic economic recovery after the epidemic is uneven, mainly manifested in the recovery of external demand being stronger than domestic demand, and the recovery of industry being stronger than that of the service industry. Whether we can expand effective investment and consumer demand and realize the transformation of growth momentum has become the key to stable growth in the next step. To open up the blockage points of the large cycle and the double cycle, it is not enough to rely solely on fiscal and monetary stimulus, and in accordance with the requirements put forward by the CPC Central Economic Work Conference at the end of last year, we must pay more attention to deepening reform and opening up to enhance the endogenous driving force for development. The relationship between balancing steady growth and promoting reform and adjusting the structure is an important part of macroeconomic policy coordination.
Underemployment is the root cause of the weak foundations of economic recovery. To adhere to the priority of employment, we must also adopt a package of policy measures. It is necessary to strengthen fiscal, monetary and other policies to support small and medium-sized enterprises and difficult industries, and to firmly adhere to the bottom line of the "three guarantees" at the grass-roots level; it is also necessary to break down the barriers to entrepreneurship through the reform of "decentralization and management of services", strengthen entrepreneurship to promote employment, promote flexible employment through multiple channels, promote the healthy development of new industries, new formats, and new business models, and increase new jobs; it is also necessary to do a good job in providing employment services to key groups through improving mechanisms and policies, strengthen the protection of the rights and interests of flexible employment personnel and older and female workers, and strengthen vocational skills training for market-oriented needs.
As the main means of macroeconomic regulation and control, it is also necessary to strengthen the coordination of fiscal and monetary policies. Since the impact of the new crown pneumonia epidemic involves more people's livelihood issues and structural issues, fiscal policy should play a greater role. In particular, in the next stage of active fiscal policy, it is necessary to reasonably grasp the progress of budgetary investment and local government bond issuance, and promote the formation of a physical workload at the end of this year and early next year, so as to promote the conversion of "wide money" to "wide credit" and enhance the effect of monetary policy.
On September 24, the third quarter monetary policy committee meeting of the central bank stressed that on the basis of flexible and accurate implementation of monetary policy, it is necessary to strengthen coordination with fiscal, industrial and regulatory policies, and coordinate financial support for the real economy and risk prevention. This echoes the proposal of the executive meeting of the State Council on September 22 on strengthening the linkage of fiscal, financial and employment policies and stabilizing the reasonable expectations of the market. The background is that the recent rectification of the platform economy, education and training industry, strengthening data security management, privacy protection, and the implementation of the dual control policy of energy consumption have triggered economic fluctuations and market shocks. This reminds us that good policies should also pay attention to increasing policy transparency and predictability, and should enhance overall awareness and market concepts in implementation. At present, in order to achieve "accurate bomb disposal", it is particularly necessary to pay attention to the technical, professional and artistic nature of specific operations, so as to avoid the improper handling of risks and the evolution into crises.
At the end of 2019, the Central Economic Work Conference pointed out in summarizing the "four important understandings" of economic work that it is necessary to optimize the mode of economic governance from the perspective of system theory, strengthen the concept of the overall situation, and seek dynamic balance among multiple goals. The "14th Five-Year Plan" emphasizes that it is necessary to improve the macroeconomic governance system with the national development plan as the strategic orientation, the fiscal and monetary policy as the main means, the employment, industry, investment, consumption, environmental protection, regional and other policies closely coordinated, and the objective optimization, reasonable division of labor, and efficient coordination. The policy response to steady growth is a major test to improve the government's economic governance capabilities. The modernization of the national governance system and governance capacity proposed by the 19th National Congress of the Communist Party of China is on the way.